Opinion analysis: Justices limit tolling of statutes of limitations that permits “stacked” class actions

Let’s try a free-association game about recent topics in Supreme Court civil procedure cases. If the first topic is “equitable tolling of statutes of limitation,” your answer should be something like “don’t bet on it.” If the second topic is “class actions,” your answer should be something like “good luck with that.” So if I tell you that the question in China Agritech Inc. v. Resh is whether equitable tolling should extend the statutory deadline for filing a class action, you wouldn’t be surprised to hear that Justice Ruth Bader Ginsburg’s opinion for a unanimous bench this morning holds that equitable tolling — a judge-made doctrine that extends the deadlines that otherwise would bar an action as untimely — is not available to validate the putative class action filed in China Agritech.

This particular case involves a tolling doctrine established in 1974 in American Pipe and Construction Co. v. Utah. That case (and the 1983 decision in Crown Cork & Seal Company Inc. v Parker) considered the effect of a failed class action on later filings by the individuals who would have been members of a class if the class action had succeeded. Together, those cases concluded that these individuals should be able to bring their own actions after the class action fails, even if the statute of limitations has expired in the meantime. The question in this case is whether that rule extends to permit not only later individual actions but also later class actions. Despite a reasonably sympathetic reception to the plaintiffs’ position during the oral argument, we now learn that the correct answer is a resounding “no.”

Ginsburg presents the question solely as one of relative judicial efficiency. Application of American Pipe to permit tolling of individual claims, she explains, makes sense “because economy of litigation favors delaying those claims until after a class-certification denial. If certification is granted, the claims will proceed as a class and there would be no need for the assertion of any claim individually.” That rationale does not apply to later class filings, she reasons, because there is an affirmative value in having all the class filings as soon as possible. Where early filing of the individual claims would simply clog dockets to no purpose in the event the court certifies a class, “early assertion of competing class representative claims” is beneficial because it allows “the district court [to] select the best plaintiff with knowledge of the full array of potential class representatives and class counsel.”

She points out that this is particularly true in actions (like this one) brought under the Private Securities Litigation Reform Act, which requires the early class filer to send notice of commencement of the class action to all potential plaintiffs. “With notice and the opportunity to participate in the first … round of class litigation, there is little reason to allow plaintiffs who passed up those opportunities to enter the fray several years after class proceedings first commenced.”

Citing an opinion written by then-Judge Samuel Alito, Ginsburg also makes a point that Chief Justice John Roberts and Justice Neil Gorsuch emphasized at the argument – that application of American Pipe has the potential to extend the statute of limitations repeatedly. “The time to file individual actions [under American Pipe] once a class action ends is finite, extended only by the time the class suit was pending; the time for filing successive class suits, if tolling were allowed, could be limitless.” The action in China Agritech, for example, is the third putative class action filed arising out of the same fact pattern. This “further distinction between the individual-claim tolling established by American Pipe and tolling for successive class actions” cuts strongly against extending American Pipe because “[e]ndless tolling of a statute of limitations is not a result envisioned by American Pipe.”

Finally, Ginsburg is unpersuaded that “declining to toll the limitation period for successive class suits will lead to a ‘needless multiplicity’ of protective class-action filings.” For one thing, the U.S. Courts of Appeals for the 2nd and 5th Circuits (which include New York and Texas) “declined to entertain out-of-time class actions in the 1980s” but seem not to “have experienced a disproportionate number of duplicative, protective class-action filings.” Empirical evidence aside, though, Ginsburg’s central response to that possibility is to repeat her earlier point, that “a multiplicity of class-action filings is not necessarily ‘needless,’” because they “may aid a district court in determining, early on, whether class treatment is warranted, and if so, which of the contenders would be the best representative.”

Perhaps the most interesting thing about the opinion is the unremittingly functional nature of the justifications that Ginsburg offers to support the result. As I mentioned in my argument preview, the justices over the last several years have been cutting back on the role of judicially crafted exceptions to statutory limitations periods, voicing the sentiment that federal courts intrude on the legislative power when they permit (or bar) actions based on equitable adjustments to a deadline set by Congress. The last decision in that line of cases came last year in CalPERS v. ANZ Securities, which held that American Pipe tolling applies only to statutes of limitations, not statutes of repose. One likely explanation for the absence of any such reasoning from this opinion is that Ginsburg dissented from the 5-4 decision in CalPERS. Perhaps if this case had been argued earlier in the term we would have seen a concurrence emphasizing the broader criticisms of equitable tolling made by the majority in CalPERS. But as it is, the only concurrence in China Agritech comes from Justice Sonia Sotomayor (who joined Ginsburg’s dissent in CalPERS), and she writes not to offer broader reasons for rejecting tolling but rather to suggest a narrowing justification for the decision – which she would limit to PSLRA cases in which potential class representatives receive notice of the initial class filing.

[Disclosure: Goldstein & Russell, P.C., whose attorneys contribute to this blog in various capacities, is among the counsel on an amicus brief in support of the respondents in this case. The author of this post is not affiliated with the firm.]